QUESTIONONE (Total: 20 marks) a). Mrs. K. Omondi has an investment capital of Kshs.1,000,000. She wishes to invest in two securities, A and B in the following proportions; The returns on these two securities depend on the state of the as shown below: Required: i) Compute the expected portfolio return. (2 marks) ii) Determine the correlation coefficient between security A and security B. (6 marks) iii) Calculate the portfolio risk. (2 marks) iv) Calculate the reduction in risk due to portfolio diversification. (4 marks) b). With the help of a diagram differentiate between an efficient portfolio and an option portfolio. (6 marks)